Barack Obama

The Summit Breakouts: Social Security

The pool report by Amy Goldstein of The Washington Post on the Fiscal Responsibility Summit's breakout session on Social Security follows:

The session was held in room 350 of EEOB, a large conference room in which participants sat around a rectangular table. At the head of the table, with an American flag on each side of them, were the two administration officials who led this breakout: Lawrence Summers, director of the WH's National Economic Council, and Gene Sperling, counselor for domestic policy at Treasury. An ideological eclectic mix of 24 guests participated (a partial list follows), including senators and House members, David Walker (former head of the GAO), representatives of labor and business, and leaders of advocacy groups that work on entitlement reform.

No major news, but Summers and Sperling each conveyed a sense that the administration will try to move on health care before Social Security, although SS will come soon after.

Sperling said in his opening remarks that "Social Security does provide the potential for something that could be done, regardless of whether it is this year or next year. It is a conversation that has gone on this town, often not successfully."

But he said the president believes "there is a new politics out there." In his closing remarks, Sperling said "This is not about getting a commission. It is finding a process of trust, where Democrats and Republicans can come together and present something together, so it is not seen simply as an invitation to partisan attack...Holding hands and jumping together."

Summers said that health care has "overwhelming importance" in achieving "longterm budget control." He said: "But Social Security is also crucial to the nation's longterm fiscal health, and Social Security is our most important government program."

He essentially said - and this is paraphrase here -- that the downturn of the financial markets had diminished the political appetite for converting part of SS to private retirement accounts. Here is a quote: In light of "the events in the market the last couple years, the sense of the need for government to take a core public responsibility for Social Security. . .has been strengthened, at least in many people's minds. Though not perhaps all minds."

Sperling, near the session's end, advocated a change to Social Security that he had touted when he worked as an economics adviser in the Clinton White House: an "add-on" to Social Security, in which workers could set aside money in private accounts beyond their payroll taxes that go into the program itself. He said that politically, that idea - called USA Accounts in the Clinton days - should not be part of Social Security reform itself. But he said, "it doesn't mean it couldn't be part of a package."

Both Summers and Sperling said there would not be consensus in today's session about how to fix the program. They also said the public was more receptive to the government making hard decisions necessary to keep SS from running out of money in the long run, because Americans are anxious about their private retirement savings and the value of their houses.

Sperling said: "I think there may be a lot more openness than we thought in the past for people to have an honest discussion about the shared sacrifice necessary to have Social Security solvency. That this would be a sure thing they could count on, and they could count on for the next 50 to 75 years."

At the end, Sperling also tried to cut through disagreement over whether the program was in a state of crisis. "I really hate the whole argument about, is this a crisis or is this not a crisis? Why do we not want to preempt a crisis. Why do we not want to do something early? It is a shame on our political system that there has never been entitlement reform without a gun to our head. . .Wouldn't it be a tremendous confidence-building thing to act early and smart?"

Those are the highlights from the administration. By far, most of the session, which lasted slightly less than two hours, was devoted to comments from around the table.

Two Republicans, House Minority Leader John Boehner and Sen. Lindsey Graham said they were willing to work with the administration, without saying they supported any specific ideas the WH might propose. Graham said: "To this new administration, if you will push this and make it a priority, I will do everything I can to make you successful. . .I will do everything I can to make sure that demagoguery does not succeed."

Boehner said the government should consider cutting or eliminating SS benefits for older Americans with high retirement incomes. "Why don't we just admit we are broke? If you have $150,000 in non-Social Security retirement income, thanks for your contributions but phase out the benefits or eliminate them. . .I don't have any problem looking people in the eye and saying, 'Thank you for your contributions, but for the good of the country, your benefits are gone.' " He also said increases in SS payments should be pegged to the Consumer Price Index, not wage inflation. And he said "we need to get serious about raising the retirement age."

David Walker, former chief of the GAO, also said the retirement age should increase. "One think that I've heard some controversy about, the retirement age - I know it's difficult, but the simple fact of the matter is, government policy needs to encourage what is in the collective best interest of the country and what is in the collective best interest of all. Government policy needs to encourage people to work longer."

Comments

Rep. John Boehner makes some interesting points. His position would gain credibility if he were to extend all Social Security limitations and cutbacks to the value of all Federal retirement benefits -- both to those of elected officials and non-elected ones.

Posted by: Cambridge1 | February 24, 2009 11:20 AM

I believe the way to save social security is to use the same retirement plan that congress has annoited itself with. I don't remember the specifics but I think it works like this. First, be a congressman for about 8 years. Then retire, age doesn't matter, keeping all of your perks like the best health care in the nation, drawing full salary that you made as a congressman and a few other sacrifices. Hey, if congress has to make sacrifices like this why shouldn't I?

Posted by: bcreek1 | February 24, 2009 9:58 AM

A Simple fix for Social Security
A very simple solution to the funding and saving of Social Security can be found in a simple reorganizing of the way FICA funds are handled. The first thing is for Congress to establish a National Savings and Security Bank. Next all Americans would have an account that their FICA funds are deposited in. The next step is to apply the fractional reserve requirement used by other banks. The next step is instead of a simple IOU being used to replace the surplus funds that are presently being paid by FICA withholding with a promissory note. A recent year the surplus was more than $365 Billion. The note or loan would then be funded by account credit and not by removing the actual funds from the bank. Yes if you are thinking this would be money creation you are correct. Banks create account credit every day. The fractional reserve requirement means only a fraction of the funds lent have to be on hand to be available for withdrawal. Additional loans could be made to local and state governments for their project needs. The opportunity to deposit extra money as a side fund to be received at retirement in additional to the normal Social Security could also be added. Some kind of profit-sharing method could be used to determine the earnings of the side fund. The existing program would remain the same.
If this very simple change had occurred at the beginning, the funds would be in the trillions today. If started immediately, it would save the program. The payments of the loans with interest plus the FICA would balloon the value of the funds many times the value of just the FICA alone.

Posted by: allencharles | February 24, 2009 5:04 AM

Actually, the United States Army is is our most important government program ; )